Public Management

Transfer of $7 bln debt from Eskom to South Africa could increase the country’s 2019 debt ratio by 2%, Moody's reveals

Monday, 17 December 2018 17:04
Transfer of $7 bln debt from Eskom to South Africa could increase the country’s 2019 debt ratio by 2%, Moody's reveals

(Ecofin Agency) - The eventual transfer of part of utility group Eskom’s ZAR419 billion ($ 30 billion) debt to South Africa could lead to a 2% rise in the country’s 2019 debt ratio, rating agency Moody’s informed in a research note published on December 12, 2018.

"The transfer will increase South Africa’s debt/GDP ratio by around two percentage points from the 55.8% envisioned for fiscal year 2019",  the agency informed, indicating that currently, it is not taking the debt security provided by South Africa to the company into account in the measurement of the country’s overall debt rate.

On December 5, 2018, Eskom, whose overall debt is ZAR419 billion ($30 billion) requested the transfer of ZAR 100 billion of this debt to the government in order to offset its balance sheet.

Moody’s, which is the only largest rating agency to consider South Africa as of Investment grade, also indicated that an eventual transfer of the debt to the government “would probably not accelerate the implementation of the [company’s] turnaround plan”.

Let’s note that on December 9, 2018, the Government Employees Pension Fund (GEPF), announced that it would acquire the Eskom’s debt securities if the government offers to help refund the company. This announcement was made after finance minister Tito Mboweni declared that Eskom should seek financing on the bond market instead of relying solely on the help of the government, which has already helped it in the past.

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